Flash Sale Site Totsy Plans to Use New Funds to Reach More Customers

The crowded field of private flash sale websites makes it hard to stand out, but New York’s Totsy plans to get ahead of the pack by focusing on parents looking for deals on baby products and other wares. The two-and-a-half-year-old company announced today it has raised $18.5 million in Series B funding led by previous investor Rho Capital Partners. DFJ Gotham Ventures, another prior investor, also participated in the round. Totsy raised $5 million in a Series A round in 2010. The latest funding, Totsy CEO and co-founder Guillaume Gauthereau says, puts the startup closer to break even and gives it more resources to help the company grow.

Totsy runs flash sales on its site for up to 72 hours aimed at its invite-only members (signing up is free) looking for deals on products for infants, kids, and parents. The items include baby and children’s clothing, bedding, toys, and prenatal care products from brands that include Ed Hardy Kids, children’s apparel maker Vive La Fete, and Disney.

Gauthereau says mothers and moms-to-be are his website’s core customers. As families grow, he says he sees more opportunities to expand the company’s current client base of some three million active users. “There are 350,000 new births every month in this country,” he says. “That’s almost 4 million moms.” The company plans, according to Gauthereau, to spend “a good chunk” of its latest funding on getting the word out to new moms about the website. Totsy already has partnerships to reach the audiences on family and parent-oriented websites such as What to Expect and Parenting. Funding will also go towards increasing the company’s operational capacity.

Totsy’s flash sales are typically centered on specific brands and offer discounts of as much as 90 percent off retail prices. The brands ship the products to Totsy’s warehouse and then the items are delivered to its customers. In addition to its New York offices, Totsy maintains a logistics center and photo studio (for shooting products) in Edison, NJ.

Totsy is not the only player chasing this segment, however. Zulily in Seattle also offers daily deals for moms and kids that provide discounts on apparel, toys, and other items. There is also new competition entering this market on the east coast. In March, Keekoo.com, based in Moorestown, NJ, launched its business by offering daily sales on products for moms who join the invite-only website.

Gauthereau says Totsy was founded with a different strategy compared with some flash sales and deals sites that emerged on the scene around the same time. “Most were focused on selling luxury goods, fashion for single women,” he says. “You’ve got Gilt, Ideeli, Rue La La, HauteLook—all started in 2008.”

Gauthereau says he did not see much opportunity to stand out as yet another luxury deals website. “Getting exclusivity in that space would be extremely difficult,” he says.

Focusing on products for moms and children has paid off, he says, as other flash sales and deals sites try to maintain site traffic and cope with other growing pains. “In the past six to twelve months, you’ve heard a lot about Groupon and others struggling to continue to deliver good offers,” he says.

Furthermore, he says there may be too much inventory in the luxury flash sales market, which may tarnish some of the original luster for the sector. “Sites keep repeating the same sales,” he says. Gauthereau believes that by selling everyday products that mothers need, as well as specialty items, his company can avoid such issues.

To help Totsy be more competitive, the website includes a community of mom bloggers who offer tips and advice for other parents. Such content, Gauthereau says, makes the website more of a destination than just a shopping portal.

Prior to co-founding Totsy, Gauthereau was CEO of luxury goods sellers Lalique North America and Lalique UK. Earlier in his career—during the tech bubble of the late 1990s—he founded Alidoo.com in Paris, a Web-based retailer of pet products. But much like Pets.com, Alidoo did not survive the great dot-com purge.

The momentum at Totsy earned Gauthereau a spot among this year’s New York–area regional finalists for the Ernst & Young Entrepreneur of the Year Award. Totsy plans to update its platform in the coming months to offer more product categories and new types of deals to its members. Specialty flash sales sites such as Totsy, Gauthereau says, speak to the needs of mothers who often visit niche brick-and-mortar stores for baby products. Other retailers may include sections for kids’ products, but he says his focus fits the way many consumers tend to shop. “When you look at where baby products are largely sold in the U.S., it’s never been at Saks, Neiman Marcus, or Bloomingdales,” he says.

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